Judge Widens AT&

By Caroline E. MayerSeptember 5, 1981

A federal judge yesterday gave American Telephone & Telegraph Co. permission to compete for the first time in the computer and data-processing business -- a ruling that could have an explosive impact on the future of the telecommunications industry.

Handing the communications giant a major victory in its bid to enter lucrative new business areas, Judge Vincent P. Biunno of the U.S. District Court in New Jersey ruled that AT&T could offer data-processing because it is a communications service.

Under a consent decree AT&T signed with the government 25 years ago, the company has been barred from offering any non-communications service. Until yesterday's ruling, that meant AT&T could not offer computer services.

Biunno changed all that -- and perhaps the entire telecommunications industry as a result -- with his ruling that computer and communications services are practically the same, given the advances made in electronic technology.

"It seems to the court beyond dispute that AT&T . . . will be engaging in the business of furnishing communications services and facilities" by providing data-processing services, Biunno wrote. The ruling was handed down from the New Jersey court because that was where the original 1956 consent decree was filed.

The decision means that begining as early as March 1, AT&T will be able to become a direct competitor with International Business Machines Corp. and other major computer companies.

What's more, the Bell System also will be able to offer a wide variety of telephone equipment and services, ranging from the black rotary-dial phone to highly sophisticated computer services, without any of the government pricing restraints it now must follow.

The judge's decision, however, by no means puts to rest the current congressional debate over AT&T's future structure and its role in the telecommunications industry. Congress is considering legislation to allow AT&T to offer data communications services, although it would bar the communications giant from offering electronic newspapers and up-to-the minute advertising. Debate on the issue is expected to continue shortly after Congress returns from its August recess.

The ruling is not only a victory for AT&T -- which had asked for the judge's decision -- but also for the Federal Communications Commission, which handed down a decision last year that in effect will allow AT&T to compete in the data-processing industry.

The Justice Department opposed the FCC ruling on the ground it violated the consent decree AT&T signed in 1956 to end a 7-year-old antitrust suit against the Bell System.

The department argued that the decree barred AT&T from offering any nonregulated, noncommunications service such as data-processing.

Justice Department officials declined to comment on the ruling yesterday and refused to say whether they will appeal the decision. Because the decision was handed down in Newark, few Justice Department lawyers had seen it.

Nor had oficials at the 11 companies and trade associations that had filed legal briefs opposing any reinterpretation of the consent decree. Although the judge refused to allow these parties to participate in the current proceeding, officials at these organizations said they certainly will try to appeal the ruling.

Among other things, these organizations have argued that unleashing AT&T to permit it to compete in the computer industry would lead to the creation of an industrial giant that would drive out much of the current competition.

AT&T said it was "gratified" by the ruling -- one it had asked for last March, five months after the FCC's Computer 2 decision. Without such a reinterpretation of the 1956 consent decree, AT&T argued it would not be able to comply with the decision, which permits AT&T to compete more freely in the marketplace, but only if the company undergoes a massive internal restructuring. Under the reorganization, any competitive service, including telephone equipment and data-processing, could be sold only through a fully separated subsidiary -- which could charge whatever price it wished.

No longer would AT&T be forced to win permission for its rate tariffs from the FCC and state regulatory agencies. And for the first time, under the FCC ruling the Bell System would be able to enter data-processing.